Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 170405 February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,

vs.
BENITA T. ONG.1 Respondent.

DECISION

CORONA, J.:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements Commented [l1]:
situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Petitioners sold 3 parcels of land to Respondent;
Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a The same properties were mortgaged to Real Savings and
notarized deed of absolute sale with assumption of mortgage3 stating: Loan Association, Incorporated (RSLAI)

The parties executed a notarized DOAS with assumption of

xxx xxx xxx mortgage.

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS
(1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from
[RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell,
transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs
and assigns that certain real estate together with the buildings and other improvements existing
thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:

1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN
THOUSAND FIVE HUNDRED (415,000), [petitioner] shall execute and sign a deed of
assumption of mortgage in favor of [respondent] without any further cost whatsoever;

2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED
EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (684,500) with REAL SAVINGS
AND LOAN,4 Cainta, Rizal (emphasis supplied)

xxx xxx xxx

Pursuant to this deed, respondent gave petitioner 415,500 as partial payment. Petitioner, on the Commented [l2]:
other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and Respondent gave 415,500 as partial payment for the
purchase price of 1.1M
authorizing it to accept payment from respondent and release the certificates of title.
Petitioner handed the keys to the properties and wrote a
Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent letter informing RSLAI of the sale
likewise informed RSLAI of her agreement with petitioner for her to assume petitioners outstanding
loan. RSLAI required her to undergo credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Commented [l3]:
Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent learned that petitioner again sold the same
properties to oen LEONA VILORIA.
Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was Commented [l4]:
informed that petitioner had already paid the amount due and had taken back the certificates of title. Respondent inquired about the credit investigation;

He was informed that petitioner had already paid the

Respondent persistently contacted petitioner but her efforts proved futile. amount due and had taken back the certificates of title.

On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the
second sale and damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of
Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to
her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner
fraudulently deprived her of the properties.
Commented [l5]: Respondent filed a complaint for specific
performance, declaration of nullity of the second sale and
damages against petitioner and Viloria with the RTC of
Antipolo, Rizal.
That Petitioner has no longer right to sell the same to Viloria
after being sold the same to the Respondent.

Petitioner, on the other hand, insisted that respondent did not have a cause of action against him Commented [l6]: Petitioner claims that since the transaction
and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition, they only entered into a
CONTRACT TO SELL.
was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only entered
into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not
arise. Consequently, the sale was not perfected and he could freely dispose of the properties.
Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.

Because respondent was a licensed real estate broker, the RTC concluded that she knew that the Commented [l7]:
validity of the sale was subject to a condition. The perfection of a contract of sale depended on Respondent was a licensed real estate broker
RTC: concluded that she knew that the validity of the sale
RSLAIs approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume was subject to a condition.
petitioners obligation, the RTC held that the sale was never perfected.
Perfection depends on RSLAIs approval of the assumption of
mortgage
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action
and ordered respondent to pay petitioner 100,000 moral damages, 20,000 attorneys fees and the Since RSLAI did not allow the same, RTC held that the sale
cost of suit. was NEVER perfected and DISMISSED the case for lack of
cause of action.

Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred Commented [l8]:
in dismissing the complaint. COURT OF APPEALS
Found that the contract executed by the parties did not
impose any condition on the sale and that the K is a
The CA found that the March 10, 2003 contract executed by the parties did not impose any condition CONTRACT OF SALE not contract to sell.
on the sale and held that the parties entered into a contract of sale. Consequently, because
And since Petitioner sold the same property to Viloria, the
petitioner no longer owned the properties when he sold them to Viloria, it declared the second sale CA declared the second sale VOID.
void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving
Commented [l9]:
respondent of the properties. 2nd CONTRACT OF SALE = VOID
Since petitioner is no longer the owner of the properties
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to when he sold them to Viloria.
Viloria. It likewise ordered respondent to reimburse petitioner 715,250 (or the amount he paid to
RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent
and pay her 50,000 moral damages and 15,000 exemplary damages.

Petitioner moved for reconsideration but it was denied in a resolution dated November 11,
2005.10 Hence, this petition,11 with the sole issue being whether the parties entered into a contract of
sale or a contract to sell.

Petitioner insists that he entered into a contract to sell since the validity of the transaction was Commented [l10]:
subject to a suspensive condition, that is, the approval by RSLAI of respondents assumption of Petitioner insists that they entered into a CONTRACT TO
SELL since the validity of the transaction was subject to a
mortgage. Because RSLAI did not allow respondent to assume his (petitioners) obligation, the SUSPENSIVE CONDITION (the approval by RSLAI of
condition never materialized. Consequently, there was no sale. respondents assumption of mortgage).
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already
conveyed full ownership of the subject properties upon the execution of the deed.

We modify the decision of the CA.

Contract of Sale or Contract to Sell? Commented [l11]:

1st issue
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that
it was a contract to sell while the CA held that it was a contract of sale.

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of Commented [l12]:
the contract. Should the buyer default in the payment of the purchase price, the seller may either sue CONTRACT OF SALE
Seller conveys ownership of the property to the buyer upon
for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the perfection of the contract.
the price is therefore a negative resolutory condition.12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does Commented [l13]:
not acquire ownership of the property until he fully pays the purchase price. For this reason, if the CONTRACT TO SELL
Is subject to a positive suspensive condition. The buyer does
buyer defaults in the payment thereof, the seller can only sue for damages.13 not acquire ownership of the property until he fully pays the
purchase price.
The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to Commented [l14]: Nothing in the instrument implied that
respondent "in a manner absolute and irrevocable" for a sum of 1.1 million.14 With regard to the petitioner reserved ownership of the properties until the full
manner of payment, it required respondent to pay 415,500 in cash to petitioner upon the execution payment of the purchase price.
of the deed, with the balance15 payable directly to RSLAI (on behalf of petitioner) within a reasonable
time.16 Nothing in said instrument implied that petitioner reserved ownership of the properties until
the full payment of the purchase price.17 On the contrary, the terms and conditions of the deed only
affected the manner of payment, not the immediate transfer of ownership (upon the execution of the
notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms
and conditions pertained to the performance of the contract, not the perfection thereof nor the
transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to
the buyer.18 In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a
notarized deed of sale is equivalent to the delivery of a thing sold. Commented [l15]:
Execution of a notarized deed of sale is equivalent to the
delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent.
Moreover, not only did petitioner turn over the keys to the properties to respondent, he also Commented [l16]:
Facts shows that there was a delivery:
authorized RSLAI to receive payment from respondent and release his certificates of title to her. The
totality of petitioners acts clearly indicates that he had unqualifiedly delivered and transferred Petitioner, by turning over of the keys of the properties to
ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into. respondent;
Authorized RSLAI to receive payment from respondent and
release his certificates of title to Respondent.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the
Commented [l17]:
condition that RSLAI had to approve the assumption of mortgage, the said condition was considered Condition is deemed fulfilled
fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the When the Petitioner prevented its fulfilment by paying his
certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil outstanding obligation and taking back the certificates of title
without even notifying respondent.
Code provides:
Purusant to Article 1186 of the Civil Code.
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.
Void Sale Or Double Sale? Commented [l18]: 2nd issue
Commented [l19]:
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two THE CASE INVOLVES A DOUBLE SALE
separate occasions.20 However, the second sale was not void for the sole reason that petitioner had Disputed properties were sold validly on two separate
occasions by the same seller to the two different buyers in
previously sold the same properties to respondent. On this account, the CA erred. good faith.

This case involves a double sale as the disputed properties were sold validly on two separate
occasions by the same seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides: Commented [l20]: The provision applies only to purchasers IN
GOOD FAITH, and therefore disqualifies those who acted in
BAD FAITH.
Article 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. (emphasis supplied)

This provision clearly states that the rules on double or multiple sales apply only to purchasers in
good faith. Needless to say, it disqualifies any purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that some other Commented [l21]:
person has a right to, or an interest in, such property and pays a full and fair price for the same at
WHO IS A PURCHASER IN GOOD FAITH?
the time of such purchase, or before he has notice of some other persons claim or interest in the
property.21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller
and payment in full of the fair price at the time of the sale or prior to having notice of any defect in
the sellers title.

Was respondent a purchaser in good faith? Yes. Commented [l22]: Respondent is a purchaser in good faith.

Respondent was not aware of any interest in or a claim on

Respondent purchased the properties, knowing they were encumbered only by the mortgage to the properties other than the mortgage to RSLAI which she
RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the undertook to assume.
balance of petitioners outstanding obligation to RSLAI. Consequently, respondent informed RSLAI
of the sale and of her assumption of petitioners obligation. However, because petitioner
surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself
rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to
perform.

Article 1266 of the Civil Code provides:

Article 1266. The debtor in obligations to do shall be released when the prestation become legally or
physically impossible without the fault of the obligor.

Since respondents obligation to assume petitioners outstanding balance with RSLAI became
impossible without her fault, she was released from the said obligation. Moreover, because petitioner
himself willfully prevented the condition vis--vis the payment of the remainder of the purchase price,
the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes,
therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have
fully complied with the condition of the payment of the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to
RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after
the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the
rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties
with the registrar of deeds, the one who took prior possession of the properties shall be the lawful
owner thereof. Commented [l23]:

2nd paragraph of 1544 applies to this case, where neither

In this instance, petitioner delivered the properties to respondent when he executed the notarized
deed22 and handed over to respondent the keys to the properties. For this reason, respondent took
actual possession and exercised control thereof by making repairs and improvements thereon.
Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became
the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was
deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would be unjustly
enriched at the expense of petitioner.
buyer registered the sale of the properties with the RD, the
one who TOOK PRIOR POSSESSION of the properties shall be
the lawful owner thereof.
Therefore, when Petitioner hand-over the keys of the property
to Respondent, there was a delivery, and the Respondent took
prior possession of the property.

Therefore, respondent must pay petitioner 684,500, the amount stated in the deed. This is because
the provisions, terms and conditions of the contract constitute the law between the parties.
Moreover, the deed itself provided that the assumption of mortgage "was without any further cost
whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We
likewise affirm the award of damages.

WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of
Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as
respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon 684,500 representing
the balance of the purchase price as provided in their March 10, 1993 agreement.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA
Associate Justice
Chairperson